Abstract

This paper compares the efficacy of three common transaction cost mitigation techniques: limiting a strategy to cheap-to-trade securities, rebalancing a strategy less frequently, and “banding,” which imposes a higher hurdle for actively trading into a position than for maintaining an established position. All three strategies significantly reduce transaction costs, but the techniques that reduce turnover have less negative impact on strategy gross performance than limiting trade to low cost securities. Banding is more effective than simply reducing rebalancing frequencies, because banding yields similar trading cost reductions while maintaining a better exposure to the underlying signal used to select stocks.

SSRN Rankings

About SSRN

We use cookies to help provide and enhance our service and tailor content.By continuing, you agree to the use of cookies. To learn more, visit our Cookies page.
This page was processed by aws-apollo5 in 0.125 seconds